Now that the much-heralded CHIPS and Science Act has been signed into law, the work to secure the entire microelectronics ecosystem must begin. We have a long way to go in restoring balance and resilience to our critical supply chains. Over the past 20 years we have let the manufacturing and the know-how that goes with it migrate overseas. U.S. dependence on foreign suppliers won’t be reversed overnight, even by building semiconductor fabrication plants here.
The offshore migration of microelectronics manufacturing was driven by lower labor and production costs in other countries—primarily in Asia—that chose long-term national investment strategies. These countries subsidized their industries to provide cheap labor and an unfair economic advantage to capture the market while the United States took a short-term, quarter-to-quarter financial focus to let the markets decide. U.S. companies moved work—and the brainpower—to the countries that made competitiveness a priority. U.S. companies simply couldn’t compete with other countries. Many U.S. companies went out of business, others consolidated to survive, and more moved work overseas.
Nowhere is this more evident than with the printed circuit board industry. Every chip, regardless of where it is made, needs a printed circuit board, or PCB, to mate to an end use device. Today PCBs themselves are complex microelectronic components that require a skilled workforce and complex and expensive equipment to keep up with technology advances.
Several decades ago, the U.S. produced almost 30% of the world’s PCBs; now we make only 4%. This means that despite the chip fabrication plants being built in the United States, we will still be vulnerable to supply chain disruptions for the PCBs and other microelectronics those plants produce. As we have seen with COVID and real time political and military rumblings in Asia, it is not hard to imagine we could see a disruption to critical sources of PCBs and other microelectronics. On our current course, the U.S. is not prepared to weather such a supply chain storm.
There are three things that need to happen to reverse this trend for PCBs, to protect the economic and national security of this country:
- Encourage existing PCB manufacturers to increase production. The demand signal from customers must be clear, strong, and sustainable.
- For those companies to move ahead, they need to invest in R&D and capital improvements to keep pace with global industry. There must be a good case for the investment community to join in this effort. They need to see the future value of such an investment and how their input figures a mutually beneficial public/private partnership.
- Reclaiming a fair share of the world’s supply of microelectronics requires consistent investment by the federal government. The DoD has led the way in this area. While only constituting about 10% of the demand for PCBs, DoD is, through policy and budgeting, pushing for a secure, trusted, reliable, and resilient supply of PCBs. The Pentagon already knows what many in Washington are just now learning: Microelectronics are key to both the economic and national security interests of the country.
The decline of American innovation and manufacturing is not inevitable. Policymakers can act now to revitalize the nation’s microelectronics industry through a comprehensive strategy of public and private investment.
This column originally appeared in the October 2022 issue of PCB007 Magazine.